Question

The Razooks Company, which manufactures office equipment, is ready to introduce a new line of portable copiers. The following copier data are available:
Variable manufacturing cost $195
Applied fixed manufacturing cost 105
Variable selling and administrative cost 75
Allocated fixed selling and administrative cost 90
1) What price will the company charge if the firm uses cost-plus pricing based on variable manufacturing cost and a markup percentage of 210%?
a) $409.50.
b) $567.00.
c) $604.50.
d) $672.00.
e) None of these.
2) What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 165%?
a) $163.64.
b) $445.50.
c) $433.64.
d) $715.50.
e) None of these.
3) What price will the company charge if the firm uses cost-plus pricing based on absorption manufacturing cost and a markup percentage of 120%?
a) $594.00.
b) $825.00.
c) $660.00.
d) $850.22.
e) None of these.

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Variable manufacturing cost $195

Applied fixed manufacturing cost 105

Variable selling and administrative cost 75

Allocated fixed selling and administrative cost 90

1)

Unitary variable cost= $195

Selling price= 195*2.1

Selling price= $409.5

2)

Total variable cost= 195 + 75= $270

Selling price= 270*1.65

Selling price= $445.5

3)

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Total absorption cost= 195 + 105= $300

Selling price= 300*1.2

Selling price= $360